HUD Gives Low Marks to Housing Project : Apartments: An inquiry finds management of a Lake View Terrace complex is below average.

A federal investigation has found serious problems in management-tenant relations, maintenance and other operations at a troubled low-income housing project in Lake View Terrace, officials at the U.S. Department of Housing and Urban Development said Tuesday.

HUD has given a “below average” rating to Spieker Cos. Inc., a management company run by Richard Tod Spieker, owner of the HUD-financed Lake View Terrace Apartments.

That unusually harsh finding requires the company to respond within 30 days, either with an appeal or a plan to correct problems at the 120-unit complex, HUD spokesman Scott Reed said.

The company’s response to the HUD report could determine whether SCI will be permitted to continue managing the complex.

An SCI executive said Tuesday that he was dumbfounded by the report and plans to appeal.

“I am confident that the rating will be changed after a legitimate and fair review,” said Michael Damron, regional manager for Lake View Terrace Apartments and five other HUD projects in Southern California owned by Spieker, a Palo Alto resident.

SCI became manager of the apartment complex in March but received only conditional approval because of questions about the company’s qualifications. HUD extended that conditional approval until December in order to further evaluate the company’s performance.

HUD officials launched a special management review this summer after tenants complained that rents were raised unfairly, accused former SCI employees of taking bribes from applicants seeking apartments and alleged that a resident manager fomented racial animosity between blacks and Latinos. That manager has since been dismissed.

Rep. Howard Berman (D-Panorama City) walked the complex to speak with disgruntled tenants this summer and urged HUD to take action. HUD will respond this week to Berman on the rent increases and bribery allegations, Reed said.

HUD’s office of inspector general conducted a preliminary inquiry into possible criminal violations, but found no reason to investigate further unless asked by other HUD officials, said Richard Fix, the department’s regional head of investigations.

The report released Tuesday focuses on deficiencies in tenant services and maintenance, and on continuing tension between tenants and management.

“Many residents complain about the lack of sensitivity on the part of your central office staff,” the review says. “Residents are concerned over recent increases in rents. . . . We also interviewed residents who indicated their units are not given adequate attention with regard to routine maintenance work.”

Damron said the report contained several errors. He said SCI has made considerable improvements at the complex since last year, when HUD gave the previous manager a higher rating.

And he said federal officials have not asked him about the corruption allegations concerning former employees, leading him to believe that the inquiry uncovered no wrongdoing, despite intense scrutiny.

“We’ve had teams of auditors swarming all over Lake View Terrace,” Damron said. “We’ve been scrutinized way more than a normal property would be.”

Berman aide Rose Castaneda said HUD has not addressed all of the questions about whether SCI should continue as manager. But she said she was encouraged by the results of the review.

“It means that HUD acknowledges that there are problems,” she said.

Lake View Terrace Apartments is privately owned but receives HUD-insured loans and federal rent subsidies for some low-income tenants.